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Lease rate review a 20-year-old can of worms

It’s a can of worms that hasn’t been opened in 20 years – the rates that Alberta producers pay to lease Crown land for grazing. Alberta’s auditor general, MerwanSaher, dropped a bit of a bombshell on July 6 of last year when he reported the province might have been losing $25 million in revenue annually by allowing leaseholders to cash in on the surface rights of the land.

In Alberta, producers who hold Crown leases receive any payments from oil and gas companies for surface damage and disruption, but in Saskatchewan and BC, the province, not the leaseholder, is entitled to the cash. A proposed bill from 1999 that sought to limit the payouts to leaseholders was never passed, but those days may soon be over.

After Saher’s report was released, the provincial government committed to looking at the issue in-depth, but the timeline recommendations on the lease rates, as well as which party the surface rights belong to, remains unclear.

“It probably won’t be in place until next spring, in 2017,” said Larry Sears, a well known and outspoken Alberta rancher, and also president of the Alberta Grazing Leaseholders Association.

Further muddying already tense waters, was a second report released by the Alberta Land Institute that estimated the province’s lost surface rights revenues as being even higher – nearly doubly high at $45 million annually.

Sears says his association has initiated a grazing lease cost study to get a better handle on what the real costs are to ranchers across the province in order to maintain the Crown lands they serve as stewards to.

“It’s been almost 10 years since we did the last one,” Sears said. “I expect they’ve (the costs) increased a little bit – the same as everything else – but I don’t think it’s significant, and I don’t think we’re going to see huge differences from what we found the last time.”

Lease rates have been frozen since 1994. Not even 10 years later, the BSE discovery in 2003 hurled the Canadian cattle industry into a crisis that didn’t abate for nearly a decade.

Sears says the public perception that producers in the province are fighting against the review of lease rates simply isn’t true.

“We’ve been pushing for a review of lease rates. We’ve been working with them to develop a model that more closely reflects what goes on with the rest of the resource-users in this province,” he said. “Part of the reason is to ensure that we’re not treated differently in the eyes of R-CALF or someone like that who might be looking at us as perhaps as having a subsidy.”

Sears says one of the options is to use a similar structure to what some other natural resources sectors do and create a royalty formula that shares surface rights revenue between leaseholders and the government.

“So we share in the good times – we split it,” explained Sears. “We share the risks and rewards and in good times we pay more, and sometimes we pay less, and the government gets less.”

The ranching industry has been criticized by the media and among members of the public for benefitting from surface rights payments that should have gone back into public coffers.

“Headlines that followed his report in July were not reflective of the recommendations that he made, and quite frankly, caused us to have to put out a lot of fires,” Sears said.

Another major objection to the current way the leases are being handled is their value on the private market. Leaseholders can sell their lease to another producer, and in some cases, the price points are many, many times higher than the amount paid annually to rent the grazing land in the first place.

However, leaseholders invest significant dollars into maintaining fences, dugouts, and other necessary infrastructure. They also bear the brunt of the risks associated with land access, whether to recreational users or to gas and oil companies. Gates are sometimes left open, sensitive grasses can be destroyed and cattle are frequently disturbed.

“Certainly you don’t want your cattle disturbed by hunters or whatnot, and there has been the odd case of one being shot accidentally. That doesn’t need to happen, nor do they need to be stirred up before you go to wean them or things like that,” Sears said, adding that most leaseholders try to accommodate land access requests by the public.

It is unclear how much weight will be given to the ecological goods and services producers are providing by taking care of the land. Research shows that biodiversity and range health is improved by managed grazing – in fact, Alberta’s grasslands co-evolved with bison and require grazing to remain healthy. Intact grasslands also serve as a methane and carbon sink, and provide habitat for at-risk wildlife.